Hang Seng Bank 0011

[winston]

Fee drop trims Hang Seng by Alfred Liu, The Standard HK

Hang Seng Bank (0011) reported yesterday a drop of 28.8 percent in first-half net profit due to narrower interest margins and a fall in fee income.

The lender said net income for the six months ended June this year was HK$6.45 billion, down from HK$9.06 billion for the same period last year. Analysts had expected earnings to fall by 10 to 28 percent.

The bank's net interest margin dropped 0.37 percentage points at 2.06 percent in the first half. Net interest income declined 11.8 percent to HK$7.28 billion in the period. Net fee income plunged 36.4 percent to HK$1.93 billion.

Hang Seng Bank - a unit of HSBC (0005) - expects its net interest margins to continue being pressured in the second half. It will focus more on non-interest business.

"Hong Kong's interest rates will remain low in the next 12 to 18 months following the US rate trend," said chief executive Margaret Leung Ko May-yee. Loan impairment charges surged 230.3 percent to HK$621 million from the first half of last year.

But that was a 76 percent decline from the second half of last year.

Leung estimates the nonperforming loan ratio for Hang Seng Bank will not rise as factory orders increased and the bankruptcy rate in the SAR is not serious.

The bank's mainland business made up 11.7 percent to total pre-tax profit, up from 9.4 percent in the first half of 2008.

New loans in the mainland fell 12.9 percent from the end of 2008, but Leung expects lending to increase over the next six to 12 months, especially to Hong Kong clients with mainland businesses.

The bank is also seeking investment opportunities in China's securities, insurance and asset management sectors.

A second interim dividend of HK$1.10 per share was declared, bringing the total distribution for the first half to HK$2.20, unchanged year-on-year.

[stilicon]

Macquarie put a TP on Hang Seng Bank of HK$ 111,- on 14/01/2010 report.

[winston]

Not sure where's the growth of the HK Banks.

Also not sure when the NPLs were surface on the SMEs and recently, the record mortgages ..

[stilicon]

About banks :

Suppose the next crisis looming is about the global level of debt and especially the sovereign debts (it is beginning in the EU zone ...). Then a possible line would be a surge of the LT rates, and meanwhile the ST rates will obviously be kept low by the States. Ie a steepening of a curve. This will provide a huge boost for the banks profits. Meanwhile, the dividend oriented counters (Reits, etc.) will severely suffer. I think I already read articles going in this sense. So I start documenting about banks.

The three Singaporean banks seem a decent bet. They will avoid most of the US and EU populist mob-lynching and taxing, and they will benefit of the asian rise in the next decade. And Singapore may rise as a financial safe haven.

As for the HK banks, I was thinking a local bank would be a safer bet than a PRC one.
But I read everywhere that BOC-HK (2388.HK) is the best thing in town.

[winston]

As for the HK banks, I was thinking a local bank would be a safer bet than a PRC one..

Actually, the PRC banks are quite safe. If they lose tons of money, there's always somebody to bail them out

[kennynah]

Singapore may rise as a financial safe haven.

don't we all wish

[winston]

Not vested. 3.6 Forward PB is cheap ?

DJ MARKET TALK: DB Raises Hang Seng Bank To Buy; Ups Target 29.6%

1059 [Dow Jones] STOCK CALL: Deutsche Bank upgrades Hang Seng Bank (0011.HK) to Buy from Hold, raises target price to HK$140 vs HK$108. Tips HSB "biggest beneficiary" of HK banks from likely 2010 rebound from cyclically low levels of net interest margin, wealth management income, which will drive ROE expansion and, similar to 2007, lead to substantial P/B expansion.

After underperformance vs peers in 2009, HSB "now looks relatively cheap," with 3.56X forward P/B below historical average of 4.3X. House raises FY09-11 earnings forecasts by 4%, 20%, 26% respectively. Stock +0.8% at HK$114.10, HSI down 1.1%.

Source: Dow Jones Newswire

[Musicwhiz]

Not vested. 3.6 Forward PB is cheap ?

Not in my opinion.

[winston]

Hang Seng Bank cuts dividend by Mandy Lo and Beth Ye, The Standard HK:-

Hang Seng Bank (0011) said net profit declined 6.2 percent to HK$13.22 billion last year, which was in line with market estimates.

But analysts were surprised that the total dividend decreased 17.46 percent to HK$5.20 per share from HK$6.30 in the previous two years, while the fourth interim dividend was HK$1.90 per share.

The lender plans to subscribe to a rights issue of [Fujian-based] Industrial Bank and to prepare for the potential tightening of capital requirement by global regulators, said chief executive Margaret Leung Ko May-yee.

"We are going to spend 2.3 billion yuan, which equals to HK$2.6 billion, on Industrial Bank," said Leung. "Interest rates are expected to stay low this year and no doubt our net interest margin will be under pressure."

Leung also said it is hard to say if governments will exit from their loose monetary policies this year.

She believes there is more room for development in the mainland but the bank currently has no plans to open more branches there.

Mainland outlets contributed 13.3 percent to last year's profit compared with 11.9 percent in 2008. Non-interest income fell by 15.4 percent. But the figure grew 13.5 percent in the the second half over the first.

Leung said sales of wealth management products will lead to growth of non-interest income services.

Turning to staff matters, she said only those who performed well are eligible for a pay rise. Hong Kong employees will get a raise of between 1 and 4.5 percent or a bonus of up to five months' pay. Mainland staff will have an increment of 4.75 to 8 percent or a bonus of up to 3 months' salary. The bank plans to hire 500 more staff in Hong Kong and 100 to 200 in the mainland, Leung said.

Vice chairman and chief executive for Hang Seng China Dorothy Sit said the bank aims to reduce its loan-deposit ratio to 75 percent by the end of next year. Hang Seng Bank shares rose 1.23 percent to HK$114.90 yesterday.

http://www.thestandard.com.hk/news_deta ... 00302&fc=2

[winston]

Not vested. From Phillips:-


Valuation

HSB's average P/B from 2003 is 3.7x, where ROE is quite stable at 23% to 28% except for FY07. HSB is now trading at about 3.3x FY10E P/B, which has reflected the dividend cut, in our view.

Once rate hikes starts in 4Q10, its share price will rise on expectation of NIM widening. We set our target FY10E P/B at 3.7x, 12-month target price is HK$119. There is 11.3% upside potential relative to last close price, adding 4.8% yield, the total return will exceed 15% with low risk. We upgrade HSB's rating to “BUY”.


Peer comparison

Key Risks

- Later than expected rate hikes
- Lower than expected fees income